value-based competition in health care · 20061212 ihi.ppt this presentation draws on michael e....

20061212 IHI.ppt

This presentation draws on Michael E. Porter and Elizabeth Olmsted Teisberg: Redefining Health Care: Creating Value-Based Competition on Results, Harvard Business School Press, May 2006. Earlier publications about health care include the Harvard Business Review article “Redefining Competition in Health Care” (June 2004). No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —electronic, mechanical, photocopying, recording, or otherwise — without the permission of Michael E. Porter and Elizabeth Olmsted Teisberg.

Value-Based Competition in Health Care

Professor Michael E. Porter

Institute for Health Care Improvement Orlando, Florida

December 12, 2006

2 Copyright 2006 © Michael E. Porter and Elizabeth Olmsted Teisberg20061212 IHI.ppt

Issues in Health Care Reform

Structure of Health Care

Delivery

Standards for Coverage

Health Insurance

and Access


The Paradox of U.S. Health Care

The United States has a private system with intense competition

But

• Costs are high and rising

• Services are restricted and often fall well short of recommended care

• In other services, there is overuse of care

• Standards of care often lag and fail to follow accepted benchmarks

• Diagnosis errors are common

• Preventable treatment errors are common

• Huge quality and cost differences persist across providers

• Huge quality and cost differences persist across geographic areas

• Best practices are slow to spread

• Innovation is resisted

• Competition is not working

• How is this state of affairs possible?


Competition on the Wrong Things Zero-Sum Competition in U.S. Health Care

• Competition to shift costs

• Competition to increase bargaining power

• Competition to capture patients and restrict choice

• Competition to restrict services in order to reduce costs

• None of these forms of competition increases value for patients


Competition at the Wrong Levels

• Market definition is misaligned with patient value

Too Broad

• Between broad line hospitals, networks, and health plans

Too Narrow

• Performing discrete services or interventions

Too Local

• Focused on serving the local community


Principles of Value-Based Competition

1. The goal should be value for patients, not just lowering costs.




2. There must be unrestricted competition based on results.

– Results vs. supply control or process compliance

– Get patients to excellent providers vs. “lift all boats”





3. Competition should center on medical conditions over the full cycle of care.


What is a Medical Condition?

• A medical condition is an interrelated set of patient medical circumstances best addressed in an integrated way

– From the patient’s perspective• Includes most common co-occurrences


Organ Transplant Care Cycle

EvaluationEvaluationEvaluation Waiting for a Donor

Waiting for a Waiting for a DonorDonor

Transplant Surgery

Transplant Transplant SurgerySurgery

Immediate Convalescence

Immediate Immediate ConvalescenceConvalescence

Long Term Convalescence

Long Term Long Term ConvalescenceConvalescence

Addressing Addressing organ rejectionorgan rejection

FineFine--tuning the tuning the drug regimendrug regimen

Adjustment and Adjustment and monitoringmonitoring


ACCESSING

INFORMING

MEASURING

MONITORING/MANAGING

RECOVERING/REHABING

DIAGNOSING PREPARING INTERVENING

• Procedure-specific measurements

• Range of movement

• Side effects measurement

• Office visits• Hospital visits

• Counseling patient and family on the diagnostic process and the diagnosis

• Counseling patient and family on treatment and prognosis

• Counseling patient and family on rehabilitation options and process

• Explaining and supporting patient choices of treatment

• Counseling patient and family on long term risk management

• Education and reminders about regular exams

• Lifestyle and diet counseling

MONITORING/PREVENTING

• Office visits• Mammography lab visits

• Self exams• Mammograms

• Medical history• Monitoring for lumps

• Control of risk factors (obesity, high fat diet)

• Clinical exams• Genetic screening

• Medical history• Determining the specific nature of the disease

• Genetic evaluation

• Choosing a treatment plan

• Mammograms• Ultrasound• MRI• Biopsy• BRACA 1, 2...• Office visits• Lab visits• High-risk clinic visits

• Hospital stay• Visits to outpatient or radiation chemotherapy units

• Surgery (breast preservation or mastectomy, oncoplastic alternative)

• Adjuvant therapies (hormonal medication, radiation, and/or chemotherapy)

• Office visits• Rehabilitation facility visits

• In-hospital and outpatient wound healing

• Psychological counseling

• Treatment of side effects ( skin damage, neurotoxic, cardiac, nausea, lymphodema and chronic fatigue)

• Physical therapy

• Office visits• Lab visits• Mammographic labs and imaging center visits

• Recurringmammograms (every 6 months for the first 3 years)

Breast Cancer SpecialistOther Provider Entities

• Medical counseling

• Surgery prep (anesthetic risk assessment, EKG)

• Patient and family psycholo-gical counseling

• Plastic or onco-plastic surgery evaluation

• Periodic mammography• Other imaging• Follow-up clinical exams for next 2 years

• Treatment for any continued side effects

Breast Cancer CareCare Delivery Value Chain

PROVIDER

MARG

INKNOWLEDGEMANAGEMENT


What is a Medical Condition?

• A medical condition is an interrelated set of patient medical circumstances best addressed in an integrated way

– Patient’s perspective• Includes most common co-occurrences• Served through Integrated Practice Units (IPUs)

• Providers can and should define the boundaries of a given medical condition differently based on patient populations

• Most providers will serve multiple medical conditions through multiple IPUs

Medical Condition 1

Medical Condition 2

Internal Medicine Surgery Radiology Cardiology Neurology Rehab

Medical Specialties/Departments


Levels of Medical IntegrationWithin Medical Condition versus Across Medical Condition

Integrated Practice Unit

Medical Condition A


Medical Condition A


Medical Condition D


Medical Condition D


Medical Condition C


Medical Condition C


Medical Condition B


Medical Condition B


Principles of Value-Based Competition1. The goal should be value for patients, not just lowering costs.2. There must be unrestricted competition based on results.3. Competition should center on medical conditions over the full

cycle of care.4. High quality care should be less costly.

- Prevention - Fewer mistakes and repeats - Early detection in treatment- Right diagnosis - Fewer delays in care delivery- Early treatment - Less invasive treatment methods- Right treatment to the - Faster recovery

right patients - Less disability- Treatment earlier in - Slower disease progression

the causal chain - Less need for long term care

• Better health is inherently less expensive than worse health






4. High quality care should be less costly.

5. Value is driven by provider experience, scale, and learning at the medical condition level.


The Virtuous Circle in a Medical Condition

Better Results, Adjusted for Risk

Deeper Penetration (and Geographic Expansion)

in a Medical Condition

Improving Reputation Rapidly AccumulatingExperience

Rising Process Efficiency

Better Information/Clinical Data

More Tailored Facilities

Greater Leverage in Purchasing

Rising Capacity for

Sub-Specialization

More Fully Dedicated Teams

Faster Innovation

Spread IT, Measure-ment, and ProcessImprovement Costs over More Patients

Wider Capabilities in the Care Cycle

• Feed virtuous circles vs. fragmentation of care








6. Competition should be regional and national, not just local.

– Virtuous circles extend across geography

– Management of care cycles across geography

– Partnerships and inter-organizational integration









7. Information on results, costs, and prices needed for value-based competition must be widely available.


The Information Hierarchy

Experience

Patient Results(Outcomes, costs and

prices)

Patient Attributes

Methods(For internal improvement)

(For risk adjustment and clinical insight)


Boston Spine Group Clinical and Outcome Information Collected and Analyzed

Patient Outcomes(before and after treatment, multiple times)

Visual Analog Scale (pain)

Owestry Disability Index, 10 questions (functional ability)

SF-36 Questionnaire, 36 questions (burden of disease)

Length of hospital stay

Time to return to work or normal activity

Service Satisfaction(periodic)

Office visit satisfaction metrics (10 questions)

Overall medical satisfaction (“Would you have surgery again for the same problem?”)

Medical ComplicationsCardiac

Myocardial infarctionArrhythmiasCongestive heart failure

Vascular deep venous thrombosisUrinary infectionsPneumoniaPost-operative deliriumDrug interactions

Surgery ComplicationsPatient returns to the operating room

Infection

Nerve injury

Sentinel events (wrong site surgeries)

Hardware failure

Surgery Process MetricsOperative time

Blood loss

Devices or products used

OUTCOMES METHODS


Measuring Value The Outcome Measures Hierarchy

SurvivalSurvival

Degree of recovery / healthDegree of recovery / health

Time to recovery / healthTime to recovery / health

Sustainability of recovery / health over time

Sustainability of recovery / health over time

Disutility of care process or treatment (e.g., discomfort, side effects, diagnostic

errors, treatment errors)

Disutility of care process or treatment (e.g., discomfort, side effects, diagnostic

errors, treatment errors)

Long-term consequences of therapy / care (e.g., care-induced illnesses)

Long-term consequences of therapy / care (e.g., care-induced illnesses)



8. Innovations that increase value must be strongly rewarded.







7. Information on results and prices needed for value-based competition must be widely available.

– Measure value– Care cycle reimbursement


Is Competition Desirable in Health Care?Good Competition

• Measuring and disseminating outcomes in medical conditions

• Competing to gain market share in medical conditions based outcomes and costs

• Integrating services over the care cycle

• Shifting care to outpatient facilities to improve patient value

• Organizing all care in a hospital system into an integrated organization for each medical condition

• Expanding excellent IPUsacross geography

Bad Competition

• Exercising power to shift costs to patients or other actors

• Restricting patients’ choice of providers

• Ownership of physician practices to capture referrals

• Shifting care to outpatient facilities to capture more revenue

• Hospital mergers with no reallocation and integration of services

• The essential question is whether competition is aligned with patient value


Moving to Value-Based CompetitionProviders

Strategic and Organizational Imperatives• Redefine the practice around medical conditions• Choose the range and types of services provided• Organize around medically integrated practice units• Create a distinctive strategy in each practice unit• Measure results, experience, methods, and patient attributes

by practice unit• Move to single bills and new approaches to pricing• Market services based on excellence, uniqueness, and results• Grow locally and across geography in areas of strength

Defining the Right Goals• Superior patient value

• Employ partnerships and alliances to achieve these aims


What Businesses Are We In?

Nephrology practice

• Hypertension Management

• Chronic Kidney Disease

• End-Stage Renal Disease

• Kidney Transplants


Configuring a Regional Integrated Practice Unit for a Medical Condition

Regional Outpatient

HubInpatient

Unit

Satellite Facilities

Referring / Disease Management

Facilities


Facilities


Facilities

Key Choices• Subspecialization of facilities / locations• Extent of ownership of the care cycle vs.

partnering• Decentralization of imaging / testing

Owned or partnerships

Satellite Facilities

Independent, owned, or

partnerships


Levels of Medical IntegrationWithin Medical Condition versus Across Medical Condition


Medical Condition A


Medical Condition A


Medical Condition D


Medical Condition D


Medical Condition C


Medical Condition C


Medical Condition B


Medical Condition B


Value-Added Health Organization

Value-Added Health Organization“Payor”“Payor”

Moving to Value-Based CompetitionHealth Plans


Moving to Value-Based CompetitionRoles of Health Plans

Provide Health Information and Support to Patients and Physicians1. Organize around medical conditions, not geography or administrative functions2. Develop measures and assemble results information on providers and

treatments3. Actively support provider and treatment choice with information and unbiased

counseling4. Organize information and patient support around the full cycle of care5. Provide comprehensive disease management and prevention services to all

members, even healthy ones

Restructure the Health Plan-Provider Relationship6. Shift the nature of information sharing with providers 7. Reward provider excellence and value-enhancing innovation for patients8. Move to single bills for episodes and cycles of care, and single prices9. Simplify, standardize, and eliminate paperwork and transactions

Redefine the Health Plan-Subscriber Relationship10. Move to multi-year subscriber contracts and shift the nature of plan

contracting11. End cost shifting practices, such as re-underwriting, that erode trust in health

plans and breed cynicism12. Assist in managing members’ medical records


Moving to Value-Based CompetitionEmployers

• Set the goal of increasing health value, not minimizing health benefit costs

• Set new expectations for health plans, including self-insured plans

• Provide for health plan continuity for employees, rather than plan churning

• Enhance provider competition on results

• Support and motivate employees to make good health care choices and manage their own health

• Find ways to expand insurance coverage and advocate reform of the insurance system

• Measure and hold employee benefit staff accountable for the company’s health value received


Moving to Value-Based CompetitionConsumers

• Participate actively in managing personal health

• Expect relevant information and seek advice

• Make treatment and provider choices based on excellent resultsand personal values, not convenience or amenities

• Choose a health plan based on value added

• Build a long-term relationship with an excellent health plan

• Act responsibly

• Consumers cannot (and should not) be the only drivers


Roles of Government in Value-Based Competition

• Require the collection and dissemination of the risk-adjusted outcome information

• Open up value-based competition at the right level

• Enable bundled prices and price transparency

• Limit or eliminate price discrimination

• Develop information technology standards and rules to enable interoperability and information sharing

• Invest in medical and clinical research

• Medicare can be a driver


Malpractice ReformHow Outcome Measures Can Help

• The current malpractice system is dysfunctional and expensive

– High direct and higher indirect costs

• Ineffective means of ensuring quality

• Outcome information will allow knowledge of actual risks


How Value-Based Care Delivery Will Change Medicine

• Physicians will become part of care cycles, and choose better partners

• Patient engagement will rise

• Physicians and hospitals will make better service line choices

• Health plans and government payors will become more supportive

• Reimbursement will be transformed

• Malpractice suits will be less common


The Critics

• Practicality– “Utopian vision”– These ideas “might occur to anyone possessed of a modicum of common sense

but not too familiar with the real world of health care.”- Uwe Reinhardt

• Medical Conditions / Provider Strategy– “Patients have a nasty habit of having more than one thing wrong with them.”

- Gail Wilensky– “If each provider focuses on only one medical condition, they will not be able to

treat the patient’s real problem…”- Various commentators

• Integrated Health Systems– “Integrated delivery systems can organize and arrange comprehensive health

services for members.”- Alain Enthoven


How Will Redefining Health Care Begin?

• It is already happening

• Each system participant can take voluntary steps in these directions, and will benefit irrespective of other changes

• The changes are mutually reinforcing

• Once competition begins working, value improvement will no longer be discretionary or optional

• Those organizations that move early will gain major benefits

• Providers can and should take the lead

value-based competition in health care · 20061212 ihi.ppt this presentation draws on michael e....

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